How to build better customer loyalty in four simple steps

Jeff Alford, SAS Insights editor

Lackluster.

That probably describes the majority of customer loyalty programs in use today. They’re not intended to be that way; it’s just how they’re implemented.

Someone on the management team mandates that a program be put in place, and without a lot of thought or research, customers are invited to join and offered enticements the company “thinks” will foster customer loyalty and continued sales. The management team can then report: Customer loyalty? Done.

In reality, not much effort – and certainly little research – went into the development of the program. Probably not much effort beyond designing a loyalty card, some webpage design, database programming and some marketing promotions.

Without attuning to your customers’ needs and wants, these programs usually fail to deliver on their promise – for you and your customers.

Good news: there are a few fairly straightforward steps you can take to help ensure your loyalty program card doesn’t end up in some dark corner of your customer’s junk drawer, never to be seen (or used).

The action plan below is the result of research commissioned by SAS and conducted by The International Institute for Analytics (IIA). The full research report, Keeping Customers: Successful Loyalty Through Analytics, is now available.

The four-step plan provides strong, evidence-based principles on which you can build a new loyalty program or bolster a flagging one.

Step one: Offer rewards that customers want

Here’s how to check to see if you’re providing offers that customers actually want. Look at the number of inactive members of your loyalty program. Are those numbers trending negatively? The research says they probably are. Benefits aren’t benefits if your customers don’t see them that way. Look to your data for answers. The researchers hypothesized that customer information is being underused in favor of taking a generalized approach.

The survey results confirmed that. Most businesses weren’t confident in their loyalty offerings because they admit they don’t know their customers as well as they should and are using fewer customer data sources than they know they should. To be more successful, you need to invest more effort in collecting and analyzing relevant customer information and then use that information to tailor your offerings.

Step two: Measure your effectiveness

Would it surprise you to know that at least 45 percent of businesses don’t have a way to know if their loyalty programs are working? The first problem is that they’re struggling to decide on their go-to metrics. The second problem is that no one seems to agree on what the best metric is. According to the IIA research, customer retention rates are the top choice, with customer satisfaction scores a close second. The cautionary note for whichever metrics you choose: Make sure you don’t go overboard trying to raise those scores by offering such lavish loyalty rewards that you hurt your profit margins.

Step three: Make it special

Like most of us, if you’re a member of multiple loyalty programs, you know that there’s often little to distinguish one from another. According to the research, the programs that stand out are those that bond customer and brand. In fact, brand affinity was shown to be the top differentiator, because the pattern seems to be that customer retention strongly correlates with affinity.

Some features that will set your program apart:

Breadth of offerings. Programs with more offers are more effective.

Focus on reward points. Membership points are identified as a top attractor.

Exclusive sales or discounts. People like to feel that they are part of a special group.

Step four: Include all your channels

For your customers, your loyalty program should be seamless, whether they’re shopping in store, online, via catalog, phone or any other channel. Forty-two percent of those surveyed identified this as one of their top challenges.

And it’s also about the channels you use to communicate with your customers. Knowing how, and how often, they want you to contact them with offers is a critical success factor for loyalty programs, according to researchers.

To read more lessons about creating effective loyalty programs and turning customers into fans, click the download button above for our research report.